We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Liberty Global Plc (NASDAQ:LBTYK).
Liberty Global Plc (NASDAQ:LBTYK) was in 38 hedge funds’ portfolios at the end of September. LBTYK investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. There were 34 hedge funds in our database with LBTYK positions at the end of the previous quarter. Our calculations also showed that LBTYK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Christian Leone of Luxor Capital Group
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the latest hedge fund action encompassing Liberty Global Plc (NASDAQ:LBTYK).
What have hedge funds been doing with Liberty Global Plc (NASDAQ:LBTYK)?
At the end of the third quarter, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LBTYK over the last 17 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Liberty Global Plc (NASDAQ:LBTYK) was held by Baupost Group, which reported holding $1045.8 million worth of stock at the end of September. It was followed by Eagle Capital Management with a $967.4 million position. Other investors bullish on the company included Luxor Capital Group, Route One Investment Company, and Berkshire Hathaway. In terms of the portfolio weights assigned to each position Manor Road Capital Partners allocated the biggest weight to Liberty Global Plc (NASDAQ:LBTYK), around 12.63% of its portfolio. Baupost Group is also relatively very bullish on the stock, dishing out 11.84 percent of its 13F equity portfolio to LBTYK.
As one would reasonably expect, some big names were leading the bulls’ herd. Wexford Capital, managed by Charles Davidson and Joseph Jacobs, created the most outsized position in Liberty Global Plc (NASDAQ:LBTYK). Wexford Capital had $39.9 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $39 million investment in the stock during the quarter. The following funds were also among the new LBTYK investors: Cliff Asness’s AQR Capital Management, Brett Huckelbridge’s Steel Canyon Capital, and Dan Sobol and Lisa Hess’s SkyTop Capital Management.
Let’s now review hedge fund activity in other stocks similar to Liberty Global Plc (NASDAQ:LBTYK). These stocks are Fidelity National Financial Inc (NYSE:FNF), Equity Lifestyle Properties, Inc. (NYSE:ELS), Vornado Realty Trust (NYSE:VNO), and BioMarin Pharmaceutical Inc. (NASDAQ:BMRN). All of these stocks’ market caps are similar to LBTYK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FNF | 28 | 340609 | -1 |
| ELS | 19 | 521910 | 1 |
| VNO | 32 | 724917 | 5 |
| BMRN | 45 | 1621801 | 0 |
| Average | 31 | 802309 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $802 million. That figure was $3405 million in LBTYK’s case. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is the most popular stock in this table. On the other hand Equity Lifestyle Properties, Inc. (NYSE:ELS) is the least popular one with only 19 bullish hedge fund positions. Liberty Global Plc (NASDAQ:LBTYK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately LBTYK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LBTYK were disappointed as the stock returned -9.6% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
